- | Thursday, November 8
- 12:15 PM
- Kaiserplatz 7-9, 4th floor, Room 4.006
Booms and Busts in Housing Markets: Prices and Turnover in Amsterdam, 1582-1810
Booms and busts in housing markets are typically characterized by four puzzling features: short-term momentum in prices, a positive price-turnover relationship, excess volatility of prices relative to fundamentals, but reversion over the longer run. This paper uses a new approach to investigate the origins of these phenomena, with specific attention to the price-turnover relationship: the analysis of historical housing markets based on archival micro-data. Using data from more than 150,000 property transactions, I discuss the structure of the Amsterdam housing market and construct an annual house price (1625-1810) and turnover (1582-1810) index: the period of Amsterdam’s Golden Age and its later decline. Subsequently, I analyze the dynamics in the market. Despite its different characteristics, most notably the very limited use of mortgage credit, the Amsterdam housing market went through several long booms and busts, which share all the modern stylized facts of such episodes, including a lead-lag relationship between turnover and house prices. Loss aversion and speculation seem to play an important role in driving this relationship.